A provocative, unsponsored assessment of current and future legal, regulatory, marketplace, and cultural issues affecting telecommunications and information policy presented by Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law, Penn State University

Thursday, October 11, 2007

Telephone and cable companies have expanded their service offerings into a triple- or quadruple play of their core service (telephony or video) plus Internet access, wireless and the other companies' core offering. To deliver this package of service the companies often have to expand bandwidth and install additional equipment at or near consumers' homes.

These companies used to install a small pedestal for the electronics and line splice needed to provide service. The right to install such equipment derived from the rights of way granted by property owners or municipal ordinanaces that convery such rights. Of course these companies qualified for free of charge rights of way based on their "public utility" characteristics. Additionally federal, state and municipal regulations existed to safeguard the public.

Telephone and cable companies have qualified for deregulation particularly based on the determination that they provide information and other non-telecommunications services. Yet these companies continue to use "legacy" rights of ways, based on their prior regulated status. Now these companies are expanding the size and footprint of the pedestals they install on private property.

My cable company attempted to install a small refrigerator-sized device on my property. These device would use electric power surely to provide services other than the core service for which the right of way was granted.

Query: can companies providing largely unregulated information services exploit rights of way granted under the pretext of a public interest need for basic telecommunications and video services? Regardless of the actual legality of doing so telephone and cable companies have expanded the size and footprint of their rights of way use and pedestal installation without having to compensate land owners.

If companies enjoy the benefits of an information services safe harbor from regulation shouldn't they lose free rights of way access? bear in mind these are the very companies that loudly claim "confiscation" when government regulates them.

Tuesday, October 9, 2007

The FCC recently released an Order that extends until Oct. 2012 a prohibition on exclusive contracting by vertically integrated programmers who deliver video content via satellite. See Implementation of the Cable Television Consumer Protection and Competition Act of 1992, Development of Competition and Diversity in Video Programming Distribution: Section 628(c)(5) of the Communications Act: Sunset of Exclusive Contract Prohibition, MB Docket No. 07-29, Report and Order (rel. Oct. 1, 2007), available at: http://fjallfoss.fcc.gov/edocs_public/attachmatch/FCC-07-169A1.doc.

Section 628(c)(2)(D) of the Communications Act requires the FCC to safeguard consumers and video programming competition from vertically integrated programmers who the Commission determines still have the ability and the incentive to favor the operators with whom they are affiliated over other competitive providers. In light of the FCC’s determination that vertically integrated ventures still control, “must see” content, for which no viable substitute exists, the Commission retained the prohibition against exclusive content distribution contracts from ventures that verticially integrate content production and distribution to consumers.

This order shows the FCC in a curiously pro-consumer, market interventionist mode, quite an opposite posture vis a vis network neutrality and the Commission's typically pro-marketplace mindset. Why is this?

First there is a statutory mandate to assess the market for content by multi-channel video programming distributors. The Commission sees an ongoing market failure even as it nearly always determines that robust competition and a well oiled marketplace exists everywhere else. So a statutory mandate to examine industry conditions typically does not trigger a pro-regulatory oversight outcome.

Second perhaps there is something about television--particularly "must see" television--and voters attitudes that forces the Commission to act. Exclusive access to via cable television of a much loved program surely will trigger consumer outrage particularly if the exclusive supplier charges what an inelastic market will bear.

Third this is an issue about vertical integration by companies consumers and apparently FCC Commissioners love to hate--cable.

So take away an explicit Congressional mandate, address content perhaps even "must see" video and substitute much beloved (or feared) telephone companies and the FCC has no problem with vertical integration, exclusive contracts for content and walled gardens. The market fails for "must see" video via cable television, but the FCC has no problem whatsoever for any exclusive content deal, including video, via the Internet and cellular telephones. IPTV and cellular telephone display of video is not cable television, but it increasingly will compete with it.

About Me

Rob Frieden serves as Pioneers Chair and Professor of Telecommunications and Law at Penn State University.He also provides legal, management and market forecasting consultancy services and has written four books, most recently Winning the Silicon Sweepstakes: Can the United States Compete in Global Telecommunications published by Yale University Press. Rob has written over one hundred articles in law reviews and telecommunications policy journals and has provided commentary in a variety of trade periodicals. He updates a major communications treatise: All About Cable and Broadband (Law Journal Press).

Rob has held senior policy making positions in international telecommunications at the United States Federal Communications Commission and the National Telecommunications and Information Administration.In the private sector, he practiced law in Washington, D.C., and served as Assistant General Counsel at PTAT System, Inc. where he handled corporate, transactional and regulatory issues for the nation's first private undersea fiber optic cable company. Professor Frieden holds a B.A., with distinction, from the University of Pennsylvania (1977) and a J.D. from the University of Virginia (1980).